SBA 7(a) Q&A
Short answer
Yes, in a partner buyout, a seller note provided by the departing partner can count towards the equity injection, but it must be on full standby and fully subordinated to the SBA loan.
Similar to other business acquisitions, a seller note from a departing partner can serve as equity injection if it adheres to the full standby requirements. This means no principal or interest payments are made on the note for the life of the SBA loan (or a minimum of two years if shorter), and the note is fully subordinated to the SBA loan, protecting the lender's position.
If you are buying out a partner for $400,000 and the total project cost is $440,000, the required 10% equity is $44,000. Your departing partner could provide a $44,000 seller note on full standby, counting towards this equity, with the rest financed by the SBA loan.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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